On the afternoon of May 29, Abdurrahman Wahid nearly sent a jolt through
the Indonesian economy. Earlier in the day, the Jakarta stock market had
slid 4.3% on news of bombings in the North Sumatra capital of Medan. The
rupiah was on a similar trajectory, and Wahid decided that something must
be done to halt the currency's free fall. That Monday, addressing his
regular meeting with economic advisers, the President announced it was
time to impose stricter foreign-exchange monitoring of exporters and prohibit
overseas trading of the rupiah. "The room was silent," recalls Faisal
Basri, chairman of the Assistance Team, one of five bodies established
to advise the President. "I told him the market would interpret the action
as a sign of panic and to please reconsider."

Wahid
did eventually reconsider, and Indonesia narrowly avoided another collision
with the International Monetary Fund, which takes a dim view of currency
controls. At the time of the meeting, IMF officials were in Washington
to negotiate the release of $372 million in suspended loans from its current
$5 billion aid package, funds vital to an economy crippled by nearly three
years of political upheaval. While the money has recently been freed up,
the Fund remains cautious. It conducted a review of Indonesia's reform
program this month and has plans for two more this year. Markets, foreign
investors and Indonesian businessmen all remain skeptical of Wahid's grasp
of economic issues and whether his hand-picked advisers can steer him
in the right direction. "We can't prevent him from having wild ideas,"
says Sri Mulyani Indrawati, Secretary of the National Economic Council.
"All we can do is damage control."

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And they haven't done much of that, either. Despite a 36% rise in exports
in the first four months of 2000, 2.4% year-to-date inflation and 3.2%
year-on-year GDP growth in the first quarter, the Indonesian economy isn't
inspiring much confidence, at home or abroad. The rupiah has lost 25%
of its value since the beginning of the year, the Jakarta Composite share
index has plunged 29%--making it one of the world's worst performers this
year--and foreign investment approvals in May were down 84% from the previous
month. Unemployment has soared to nearly 40% of the workforce.

If Wahid is aware of the seriousness of the crisis, he isn't showing it.
His coalition cabinet appears more interested in party politics than in
coming up with clear and coherent economic strategies. "Each minister
has his own idea, and that leads to confusion," says Martin Panggabean,
chief economist at Bank Mandiri. It doesn't help that Wahid runs a revolving
door cabinet. Since October, he has axed five ministers in an apparent
bid to consolidate political power, usually with little explanation. The
most controversial sacking was that of Laksamana Sukardi, former Minister
of Investment and State Enterprises, in April. The ex-Citibank vice president
was highly regarded for professionalism and a commitment to clean government.
His dismissal raised fears that Wahid may be taking the economy out of
capable hands and placing it into the pockets of his inner circle. Two
close associates of Wahid have taken over the influential economic ministries
overseeing state-owned enterprises, industry and trade, though critics
question their experience and qualifications. "People are confused about
whether he is sincere or just catering to certain interests, repeating
the mistakes of Suharto and Habibie," says adviser Sri Mulyani.

Expect more rough times in the weeks ahead. Rice prices and interest rates
are rising and fuel subsidies are to be removed in October, on the IMF's
advice. An embezzlement scandal involving Wahid's former masseur--who
is said to have received $4.7 million from a government agency--remains
unsolved. The President's standoff with central bank governor Sjharil
Sabirin, under arrest for his suspected role in last year's Bank Bali
scandal, could backfire unless the Attorney General presses corruption
charges to prove that the governor's 20-day detention was not a pretext
to replace him with a Wahid candidate. And who knows what the President
might come up with at the next Monday meeting? Write to TIME at mail@web.timeasia.com